This is the third article in a 6-part series focusing on how CEOs adjust to their disruptive business environments and what they learned from their efforts that might be helpful to other CEOs. Here, we turn to the CEO’s role in creating and sustaining an organizational culture that leads to adaptation and responsiveness. Our interviews revealed several ways CEOs can influence the culture within their organizations: articulating and embedding values, hiring and growing talent, and aligning organizational systems.

The leaders we interviewed (Joe DePinto, CEO, 7-Eleven; Mike Fucci, Chairman, Deloitte; Tony Guzzi, CEO, EMCOR; Margaret Keane, President and CEO, Synchrony Financial; Bob Leduc, President, Pratt & Whitney; and Bob Weidner, President and CEO, MSCI) all agreed the most important thing they do is shape and reinforce the organization’s culture. Bob Leduc expressed it clearly: “I am a firm believer that my job is to define the culture we want, model the culture we want and nourish the culture we want.” Tony Guzzi agreed. “In the end, the biggest thing you can try to shape is the culture in the organization.” Joe DePinto said the executive’s role is “getting the right culture, setting the right tone, demonstrating that is the way we want to do things, but it’s picking the right folks and then allowing them the leeway…give their folks room to run and room to grow.” Margaret Keane, who was named among Fortune’s most powerful women CEOs in the Fortune 500 in 2017, talked about establishing the organization’s culture following its spin-off from General Electric:

“When we spun off from GE, it was very important that we quickly established our own culture and values—taking what was great from GE, and also becoming our own, bold, visionary company. It’s something we drive every day and I must own as the CEO. The spinoff gave us a great opportunity to reshape who we were and who we wanted to become and that is all based on our values.

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Articulating and Embedding Values. Recognizing the need to develop flexibility, initiative and adaptability in their organizations to respond to the disruptions in their business environments, these CEOs worked to articulate and embed values that promoted these characteristics. Among other values, Bob Leduc stressed empowerment, integrity and employee development at all levels within the company. He also recognized he could not shape the culture alone. “I can certainly set the tone but then I need senior leaders to do that exact same thing. They need accurate senses to find it, they need to model it, and they need to embrace it and nourish it.” Margaret Keane emphasized being bold and responsible, while driving continuous improvement and leader development. For Joe DePinto, customer and store-focused servant leadership is essential. As the CEO of a large and diverse engineering company with 33,000 employees, Tony Guzzi values decision-making and accountability throughout the organization.

These CEOs did more than formally communicate the company’s values. They were present throughout the organization to encourage and reinforce the values. Joe DePinto captured this theme: “You’ve got to be around. You’ve got to be visible; it’s important in all businesses, and certainly in our franchise business. Franchisees have to know that the leadership is available. So, we are very open, very available, very accessible.” Tony Guzzi personally attends and participates in every leader development program the company conducts for its senior executives. They also reinforced the values by how they responded when things didn’t go as planned. One of our CEOs shared a poignant story about an expensive failure on a systems test. Despite the cost, he saw it as an opportunity to reinforce empowerment and foster trust, so he and the relevant managers initiated an after-action review (AAR) to determine the cause and fix the problems and the process.

At Pratt & Whitney, Bob Leduc reinforces the company’s culture, vision and values through periodic conversations at all levels within the organization. He continuously champions the concept of “going beyond,” not just in service to the customer but also in how employees treat and work with each other. Bob acknowledged that it took a few iterations before his messages were fully understood and embraced. After setting the vision and mission for the company, he has relied on a framework of frequent reinforcement throughout the organization.

“I view my most important responsibility to be setting the vision, longer-term mission and near-term objectives of the enterprise,” he said. “I also need to set expectations about the company culture that’s needed to achieve our goals. It’s then the job of the broader leadership team to cascade these concepts through their organizations to ensure alignment from top to bottom. And I make a point of reinforcing them constantly in large forums like global employee town hall meetings and executive conferences and in smaller settings like individual performance conversations. I ask my direct reports to tell me what, specifically, they are doing to advance the company’s mission and to foster our desired culture. I expect them to ask the same questions of their teams. I really believe that it’s not enough to set these expectations once and move on. A constant drumbeat is needed to maintain focus and is especially important during times of change or challenge.

Hiring and Growing Talent. Getting the right people in the right positions within the organization is not a new concept, but the leaders interviewed reinforced the importance of hiring talented people and nurturing their growth, all with an eye to reinforcing the organization’s culture and responsiveness to the environment. As Bob Leduc put it, “I should be spending time on people development and strategy—that is where the vast majority of my time should be…One of the most important things I can do is shape how this company is led at multiple levels. And if you do that, and you shape the culture the right way, then you increase your chance of being successful.” While all the CEOs relied on different strategies, they shared that the business demands they faced required attention to values and leadership abilities as well as technical skills in hiring and advancement decisions.

CEOs paid specific attention to growing the bench for executive leadership. Mike Fucci indicated, “I’m a big supporter of succession planning, and I believe learning and succession are inexplicably linked.” Bob Leduc put it directly when he said, “I believe that my successor is sitting around my table today and this will become the modus operandi.”

Leader development strategies take many forms. At 7-Eleven, for example, Joe DePinto meets with his senior leaders every 6 months to review all directors and above to assess their performance and leadership. This review is done in a cross-functional setting giving all senior executives an enterprise view of the bench. Tony Guzzi at EMCOR supplements formal training and development programs with peer-to-peer learning to develop his bench. Other firms combine in-house training with external leadership development programs and on-the-job “stretch” assignments to grow their leadership bench. At Deloitte, for example, leaders are encouraged to take an overseas project to grow their global experience. The important takeaway is all these efforts are directed at reinforcing the organizational leadership culture to respond effectively to the external environment.

Aligning Systems. Finally, the CEOs reinforced the importance of ensuring that organizational systems are aligned in ways that reinforce the culture and values. The examples they shared illustrate how operations, marketing, customer support, human resources, financial, legal systems and attendant policies and procedures must all be integrated with the organization’s culture and values. The CEOs acknowledged this is not easy to do, especially if the firm is undergoing substantial culture change; however, it’s the CEO’s job to make sure systems are aligned with cultural expectations.

Special emphasis was given to human resource functions—selection, onboarding, performance management, promotion, leader development and compensation must all be in sync with company values and cultural expectations. The CEOs are responsible for ensuring that the organization’s systems are congruent with the culture they are trying to foster. For example, at 7-Eleven, the performance appraisal and succession planning systems are explicitly aligned with the articulated values and characteristics of effective leadership in their complex business environment. Pratt & Whitney is doing the same thing. Tony Guzzi at EMCOR has synchronized performance metrics and incentives with organizational values.

Executive leadership is cultural leadership. Our CEOs clearly understand their responsibility to shape and reinforce the organization’s culture to ensure the business thrives in a dynamic marketplace. They pay attention to articulating and embedding values that promote the adaptation and flexibility. They also realize they cannot do it by themselves, so they ensure they recruit, hire and grow the right talent. Then they align systems and procedures to reflect the company’s values and take advantage of talented employees.

In the next two articles, we will take a closer look at how CEOs can respond to their dynamic environments by creating agile organizations and developing nimble employees. We will examine how the CEOs transformed their companies into learning organizations and review their specific approaches to individual employee development.

CEO CONFIDENCE INDEX

Our monthly reading of CEO confidence in business conditions fell sharply in December as the nation’s business leaders increasingly perceived that gathering economic and political headwinds. The CEO Confidence Index is at its lowest levels in two years.

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